The wealth group saw its total revenue for the full year fall by 22 per cent from financial year 2018, with its chairman citing a decline in transaction income, in addition to heightened compliance and corporate costs.
Evans Dixon’s underlying earnings for the year came to $37.1 million, down by 26 per cent, although it included $1.2 million in expenses relating to the acquisition of Fort Street Advisers and $0.9 million in other pre-acquisition costs.
Revenue for FY19 came to $239 million.
The company’s net profit after tax and amortization fell by 33 per cent from FY18 to $21.8 million.
Its profit for the year, profit from ordinary activities attributable to shareholders, was down by 12.9 per cent to $16.7 million.
Chairman David Evans commented: “Reduced transaction activity, fewer capital raisings for new funds management investment strategies and increased corporate costs have led to lower group earnings. We are focused on addressing areas of underperformance.
“More broadly, as the financial services industry evolves, we recognise the importance of our business responding to changes to ensure we remain at the forefront of financial services in Australia.”
In his letter to shareholders, Mr Evans said he expects that the company’s new chief, Peter Anderson, will lead it through “the changes required” to return it to growth, as he holds more than 25 years of experience in financial services and “has led some of Australia’s largest and most complex restructuring engagements.”
Mr Anderson has commenced an operational review across the group’s three businesses.
“We are in the process of completing an operational review, which will determine the areas of the business where, while maintaining our client first focus, we can make improvements and achieve greater efficiencies,” Mr Anderson said.
“Principally, we have identified an opportunity to better integrate the component businesses and to achieve the economies of scale offered by bringing three financial services businesses together. Similarly, there are opportunities for the businesses to better collaborate and to develop a cohesive and scalable platform for growth.”
As a consequence of the group’s results, Evans Dixon’s key management personnel saw their remuneration slashed by two-thirds (66 per cent) to $2.7 million for the year. The difference has not accounted for an additional $10.3 million special bonus paid the year before.
However, despite the downfall and a “challenging environment”, Evans Dixon managed to grow its client numbers by 300, recording increases in its high-net-wealth client base.
The company’s funds under management (FUM) rose by 21 per cent, and its funds under advice swelled by 10 per cent.
Wealth earnings down by a third, funds management plummets 42 per cent
The wealth advice division, comprising Evans Dixon’s financial and investment advice suites, along with wealth and portfolio management, and superannuation administration, saw its underlying EBITDA drop by 32 per cent to $14.7 million.
Net revenue for the segment was down by 10 per cent to $14.7 million.
However, funds under advice at the end of the year was $20.1 billion, 10 per cent up on the year before.
The total number of clients increased by more than 300 to 9,300, with most of the growth in one of its two offerings, Evans & Partners. The other brand, Dixon Advisory, saw its total clients remain stable.
Advice and service fees grew by 1 per cent over year, limited by asset-based fee caps, Evans Dixon reported.
Brokerage was up by 14 per cent, benefiting from client growth and increased trading activity.
Growth in the business, Evans Dixon reported, was offset by lower capital markets revenue.
The funds management business, on the other hand, saw its underlying earnings plunge by 42 per cent to $27.4 million for the year, with Evans Dixon citing lower transaction and performance fees, along with costs from internalising investment management.
Its net revenue was 12 per cent lower than the prior corresponding period, coming to $78.6 million for FY19.
The segment’s FUM grew by 21 per cent to $6.8 billion.
FUM-based management fees were up 17 per cent on the prior year. However, performance fees for the segment were down by 81.5 per cent to $700,000.
Direct expenses were up 6 per cent due to increased costs associated with new funds launches in the second half, along with the transitioning of the equities business to a direct investment platform from fund of fund structures.
Meanwhile, corporate and institutional business managing growth
The corporate and institutional segment produced a net revenue of $55.9 million, up 17 per cent from FY18, while underlying EBITDA was 8 per cent higher, rising to $21.4 million.
The acquisition of Fort Street Advisers was said to provide an enhanced capital markets platform and increased corporate advisory expertise.
Fraught US property fund
Also of concern was the company’s troubled US Masters Residential Property Fund (URF).
Former group chief Alan Dixon stepped down from his role in June to salvage the fund. At the time, URF told shareholders it would be cutting its dividends from 5 cents to 1, as well as selling the property portfolio to pay off its debts.
Since then, Mr Dixon has taken an extended leave of absence for personal reasons. In his place as co-heads of the investment manager of the fund are Kevin McAvey, co-chief financial officer and Brian Disler, general counsel.
Mr Dixon however has continued as a director of Evans Dixon, as well as its New Energy Solar fund.
The responsible entity for URF is attempting to address the strategy and unit price of the fund.
Evans Dixon indicated it is expecting an FY20 result broadly in line with FY19.
Looking forward, the company remains confident that its adviser base is well educated enough and its fee-for-service model is appropriate for the future.
Earnings per share were 7.5 cents, down from 11.5 cents in FY18. The board declared a fully franked dividend of 3 cents per share for the full year.
On Monday afternoon, Evans Dixon’s share price sat at 67 cents, having sunk from a year before when it was $2.30.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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